Building resilient long-term equity portfolios
In a new whitepaper, we provide evidence that portfolios constructed to diversify across underlying return drivers have historically delivered improved risk-adjusted returns, lower volatility and more stable performance.
The following introduces our new whitepaper on a multifactor approach to US equity.
For most of the past decade, equity investing has appeared deceptively simple. Strong performance from a handful of US large-cap growth stocks has delivered stellar returns for market-cap weighted strategies that have a significant allocation to the US. That playbook worked exceptionally well.
But it worked for very specific reasons. And that raises the core question: What if those conditions don’t persist?
Our new research paper addresses this challenge.
Using the US market as a case study, we empirically show that portfolios constructed to diversify across underlying return drivers have historically delivered improved risk-adjusted returns, lower volatility and more stable performance across market regimes.
The evidence suggests that resilient long-term equity portfolios should move beyond traditional notions of diversification* and instead be designed explicitly around balanced exposure to persistent sources of return, combined with broad participation across market segments.
If the last decade was characterised by simplicity, we believe the next is likely to reward deliberate and resilient portfolio construction.
*It should be noted that diversification is no guarantee against a loss in a declining market.
Past performance is not a guide to the future.
